Capital Gains TAx - one rule for MPs, another for us?
Discussion
Geoff Hoon, from the telegraph:
http://www.telegraph.co.uk/news/newstopics/mps-exp...
Mr Hoon is believed to have made a profit of around £300,000 on the London home he sold in 2006. The property had been rented out for four years before it was sold. During this time, he had lived in a grace-and-favour flat in Whitehall and owned a substantial “family” home in Derbyshire. Within months of changing ministerial positions and leaving the grace-and-favour property, Mr Hoon sold the London house, telling the tax authorities that it was his “principal” residence. He then bought another London property and claimed expenses on that.
Mr Hoon said: “I reject any suggestion of any wrongdoing in relation to my declarations to the House of Commons authorities and HMRC. I have been consistent in my declarations to both parties and I have been assiduous in ensuring that I have met my reporting obligations and my tax liabilities.
“In 2006 the property was sold. A full tax declaration was made on my behalf by a reputable company of chartered accountants. They advised — and this was agreed by the Inland Revenue — that there was no liability for capital gains tax.”
Mr Hoon added that his tax arrangements had been reviewed recently by HMRC, which confirmed that there was no liability for CGT.
How can the HMRC have cleared this for CGT?
Seems a clear breach of main home exemption.
tw@ts
http://www.telegraph.co.uk/news/newstopics/mps-exp...
Mr Hoon is believed to have made a profit of around £300,000 on the London home he sold in 2006. The property had been rented out for four years before it was sold. During this time, he had lived in a grace-and-favour flat in Whitehall and owned a substantial “family” home in Derbyshire. Within months of changing ministerial positions and leaving the grace-and-favour property, Mr Hoon sold the London house, telling the tax authorities that it was his “principal” residence. He then bought another London property and claimed expenses on that.
Mr Hoon said: “I reject any suggestion of any wrongdoing in relation to my declarations to the House of Commons authorities and HMRC. I have been consistent in my declarations to both parties and I have been assiduous in ensuring that I have met my reporting obligations and my tax liabilities.
“In 2006 the property was sold. A full tax declaration was made on my behalf by a reputable company of chartered accountants. They advised — and this was agreed by the Inland Revenue — that there was no liability for capital gains tax.”
Mr Hoon added that his tax arrangements had been reviewed recently by HMRC, which confirmed that there was no liability for CGT.
How can the HMRC have cleared this for CGT?
Seems a clear breach of main home exemption.
tw@ts
johnfm said:
yes, but the exemption has rules. You cannot just nominate any house and change that every time you sell one of your properties. He had rented it out for four years, then sold it. How can it then be nominated as 'main residence'?
Yes you can.CGT rules allows the tax payer to exercise options as to which property is their Principal Private Residence (PPR).
These are very useful rules and lots of people have exercised them on many occasions (including some of my clients). I would hate to think that just because some MPs have used the rules too that the ability to elect your PPR was removed.
Don't let your anger at politicians queer the pitch for everyone else.
(I can see Darling scratching out the "Election" sections of the CGT regulations as we speak).
johnfm said:
yes, but the exemption has rules. You cannot just nominate any house and change that every time you sell one of your properties. He had rented it out for four years, then sold it. How can it then be nominated as 'main residence'?
You're wrong. I told you this last week on another thread. I listened to a full explanation from a tax expert at Smith Williamson. Anyone can do what they have done providing that they do it within certain timeframes.johnfm said:
Geoff Hoon, from the telegraph:
http://www.telegraph.co.uk/news/newstopics/mps-exp...
Mr Hoon is believed to have made a profit of around £300,000 on the London home he sold in 2006. The property had been rented out for four years before it was sold. During this time, he had lived in a grace-and-favour flat in Whitehall and owned a substantial “family” home in Derbyshire. Within months of changing ministerial positions and leaving the grace-and-favour property, Mr Hoon sold the London house, telling the tax authorities that it was his “principal” residence. He then bought another London property and claimed expenses on that.
Mr Hoon said: “I reject any suggestion of any wrongdoing in relation to my declarations to the House of Commons authorities and HMRC. I have been consistent in my declarations to both parties and I have been assiduous in ensuring that I have met my reporting obligations and my tax liabilities.
“In 2006 the property was sold. A full tax declaration was made on my behalf by a reputable company of chartered accountants. They advised — and this was agreed by the Inland Revenue — that there was no liability for capital gains tax.”
Mr Hoon added that his tax arrangements had been reviewed recently by HMRC, which confirmed that there was no liability for CGT.
How can the HMRC have cleared this for CGT?
Seems a clear breach of main home exemption.
tw@ts
In his defence, he was very busy at the time sending British troops to Iraq to die because he hadn’t supplied them with enough kit to protect them from enemy fire. http://www.independent.co.uk/news/uk/politics/hoon...http://www.telegraph.co.uk/news/newstopics/mps-exp...
Mr Hoon is believed to have made a profit of around £300,000 on the London home he sold in 2006. The property had been rented out for four years before it was sold. During this time, he had lived in a grace-and-favour flat in Whitehall and owned a substantial “family” home in Derbyshire. Within months of changing ministerial positions and leaving the grace-and-favour property, Mr Hoon sold the London house, telling the tax authorities that it was his “principal” residence. He then bought another London property and claimed expenses on that.
Mr Hoon said: “I reject any suggestion of any wrongdoing in relation to my declarations to the House of Commons authorities and HMRC. I have been consistent in my declarations to both parties and I have been assiduous in ensuring that I have met my reporting obligations and my tax liabilities.
“In 2006 the property was sold. A full tax declaration was made on my behalf by a reputable company of chartered accountants. They advised — and this was agreed by the Inland Revenue — that there was no liability for capital gains tax.”
Mr Hoon added that his tax arrangements had been reviewed recently by HMRC, which confirmed that there was no liability for CGT.
How can the HMRC have cleared this for CGT?
Seems a clear breach of main home exemption.
tw@ts
johnfm said:
Eric
I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
No, there are ELECTIONS which need to be made within certain time limits (two years rings a bell) but the amount of time you need to have lived in a property itself to establish it as a main residence is not set out specifically in the legislation. Residency in the property is established by looking at all the facts surrounding the use and availability of the property with actual time spent living there as an influencing factor only - rather than a deal breaker.I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
This has been done on purpose so as to keep the rules flexible.
Eric Mc said:
johnfm said:
Eric
I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
No, there are ELECTIONS which need to be made within certain time limits (two years rings a bell) but the amount of time you need to have lived in a property itself to establish it as a main residence is not set out specifically in the legislation. Residency in the property is established by looking at all the facts surrounding the use and availability of the property with actual time spent living there as an influencing factor only - rather than a deal breaker.I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
This has been done on purpose so as to keep the rules flexible.
No doubt HMRC would expect to see names on electoral rolls, council tax bills, utility bills etc to show some element of residency - unless you are an MP.
johnfm said:
Eric Mc said:
johnfm said:
Eric
I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
No, there are ELECTIONS which need to be made within certain time limits (two years rings a bell) but the amount of time you need to have lived in a property itself to establish it as a main residence is not set out specifically in the legislation. Residency in the property is established by looking at all the facts surrounding the use and availability of the property with actual time spent living there as an influencing factor only - rather than a deal breaker.I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
This has been done on purpose so as to keep the rules flexible.
No doubt HMRC would expect to see names on electoral rolls, council tax bills, utility bills etc to show some element of residency - unless you are an MP.
The flexibility over elections for PPR status of a property is GENUINELY open to ALL taxpayers who have more than one property and who can avail of the elections i.e. at some point in the ownership of the elcted property they either lived in it or INTENDED to live in it. I am sure the MPs involved were able to satisfy HMRC in the same way anyone else would have needed to. Have you any evidence that their applications were treated differently?
If an individual classifies themselves as a property developer than they CANNOT avail of a Capital Gains Tax relief as a property developer is, by definition, running a business and therefore is going to be taxed under Income Tax rules (or Corporation Tax rules if a limited company) when properties are disposed of at a profit. These options for PPR do not exist outside of CGT.
I'm afraid this particular allegation against MPs is a total red herring and there is a strong likelihood that a very useful tax optimisation device which is open to all will be rescinded because of a stupid witchhunt mentality which is currently prevailing.
By all means gave a go at MPs if they behave illegally or even imorally, but be careful because you don't want to "screw the pooch" for everyone else.
Eric Mc said:
johnfm said:
Eric Mc said:
johnfm said:
Eric
I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
No, there are ELECTIONS which need to be made within certain time limits (two years rings a bell) but the amount of time you need to have lived in a property itself to establish it as a main residence is not set out specifically in the legislation. Residency in the property is established by looking at all the facts surrounding the use and availability of the property with actual time spent living there as an influencing factor only - rather than a deal breaker.I have used the rules - on a house that took 6 months to sell. We had lived in that house for a few years and then moved to another house - bridging until the old main house sold.
I thought there was a time limit when nominating a PPR.
This has been done on purpose so as to keep the rules flexible.
No doubt HMRC would expect to see names on electoral rolls, council tax bills, utility bills etc to show some element of residency - unless you are an MP.
The flexibility over elections for PPR status of a property is GENUINELY open to ALL taxpayers who have more than one property and who can avail of the elections i.e. at some point in the ownership of the elcted property they either lived in it or INTENDED to live in it. I am sure the MPs involved were able to satisfy HMRC in the same way anyone else would have needed to. Have you any evidence that their applications were treated differently?
If an individual classifies themselves as a property developer than they CANNOT avail of a Capital Gains Tax relief as a property developer is, by definition, running a business and therefore is going to be taxed under Income Tax rules (or Corporation Tax rules if a limited company) when properties are disposed of at a profit. These options for PPR do not exist outside of CGT.
I'm afraid this particular allegation against MPs is a total red herring and there is a strong likelihood that a very useful tax optimisation device which is open to all will be rescinded because of a stupid witchhunt mentality which is currently prevailing.
By all means gave a go at MPs if they behave illegally or even imorally, but be careful because you don't want to "screw the pooch" for everyone else.
How they obtained the monies used to enhance the properties in the first place is a totally different issue and was, I wholeheartedly agree, totally reprehensible.
As I said, attack them where they deserve to be attacked - but don't attack them in an area where WE could end up losing too.
As I said, attack them where they deserve to be attacked - but don't attack them in an area where WE could end up losing too.
Edited by Eric Mc on Thursday 21st May 16:34
Eric Mc said:
How they obtained the monies used to enhance the properties in the first place is a totally different issue and was, I wholeheartedly agree, totally reprehensible.
As I said, attack them where they deserve to be attacked - but don't attack them in an area where WE could end up losing too.
I don't personally see why anyone should be exempt from paying CGT on the profit from a second home. Presumably it's tapered like other assets? Why should second homes have an exemption when shares don't? I would have thought that investing in shares and in businesses is far more productive and useful to the economy than investing in second homes.As I said, attack them where they deserve to be attacked - but don't attack them in an area where WE could end up losing too.
unrepentant said:
Eric Mc said:
How they obtained the monies used to enhance the properties in the first place is a totally different issue and was, I wholeheartedly agree, totally reprehensible.
As I said, attack them where they deserve to be attacked - but don't attack them in an area where WE could end up losing too.
I don't personally see why anyone should be exempt from paying CGT on the profit from a second home. Presumably it's tapered like other assets? Why should second homes have an exemption when shares don't? I would have thought that investing in shares and in businesses is far more productive and useful to the economy than investing in second homes.As I said, attack them where they deserve to be attacked - but don't attack them in an area where WE could end up losing too.
People are not exempted from paying tax a "second home". They are exempted from paying tax on their Main Residence. When people own more than one home and have lived in both at various times, it is only fair that the Main Residence exemption is applied in some form to any disposals.
I think the principle is quite sound - but the enactment can be very tricky and quite difficult to ascertain what the status is/was of a second - or even third - property.
Do you LIKE paying tax?
Horse_Apple said:
In his defence, he was very busy at the time sending British troops to Iraq to die because he hadn’t supplied them with enough kit to protect them from enemy fire. http://www.independent.co.uk/news/uk/politics/hoon...
Haven't read the link, but I know he was on holiday, and refused to sign any MoD supply contracts whilst he was away.That's why UK troops had to be supported by the US Army for the first part of GW2.
I would think that his holiday cost the taxpayer (in one contractor I know) hundreds of thousands by delaying a few orders.
To be honest, supplies for the armed forces has been a problem ever since Labour got in. In the past, and literally to 97, MoD warehouses were kept full of kit that was called off over time. But someone decided that to save some money they would get rid of much of the storage facilities and order kit when it was needed.
This meant that either suppliers had to keep the stuff in stock (unlikely), or that the cost of an item increased when it was needed.
The MoD since about the mid 80s have had so few suppliers, that work was rationed out to ensure that suppliers stayed in business. It was still kept competitive, but they were aware of the dwindling number of companies who could supply what they needed. When Labour got into power, that all changed.
A few more companies went under as the work dried up, and the cost of items not only increased because of urgency of items, but because there were so few suppliers left who could put in any sort of competitive quotes.
The whole exercise has ended up with the MoD spending more on supplies than it ever used. All thanks to the Labour Party.
tinman0 said:
Horse_Apple said:
In his defence, he was very busy at the time sending British troops to Iraq to die because he hadn’t supplied them with enough kit to protect them from enemy fire. http://www.independent.co.uk/news/uk/politics/hoon...
Haven't read the link, but I know he was on holiday, and refused to sign any MoD supply contracts whilst he was away.That's why UK troops had to be supported by the US Army for the first part of GW2.
I would think that his holiday cost the taxpayer (in one contractor I know) hundreds of thousands by delaying a few orders.
To be honest, supplies for the armed forces has been a problem ever since Labour got in. In the past, and literally to 97, MoD warehouses were kept full of kit that was called off over time. But someone decided that to save some money they would get rid of much of the storage facilities and order kit when it was needed.
This meant that either suppliers had to keep the stuff in stock (unlikely), or that the cost of an item increased when it was needed.
The MoD since about the mid 80s have had so few suppliers, that work was rationed out to ensure that suppliers stayed in business. It was still kept competitive, but they were aware of the dwindling number of companies who could supply what they needed. When Labour got into power, that all changed.
A few more companies went under as the work dried up, and the cost of items not only increased because of urgency of items, but because there were so few suppliers left who could put in any sort of competitive quotes.
The whole exercise has ended up with the MoD spending more on supplies than it ever used. All thanks to the Labour Party.
I do know a couple of suppliers who have made a fortune by servering ties with the MOD and supplying to private security firms who tend to like to kit out their staff as they cost more to lose.
Cheap labour will lend to cheap working practices if you have dishonest people in charge.
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